|
Getting your Trinity Audio player ready...
|
With Redwood City facing a budget deficit, CalPERS, the pension system for many public employees across the state and Other Post-Employment Benefits will see changes after the city unanimously approved modifying the current strategy.
The change includes pausing additional payments until a new strategy is crafted. Additionally, the city will send the minimum required payments for three years.
The city has a revenue of $342 million against $335 million in expenditures for FY 2023-24.
Personnel costs, including salaries, wages, and benefits, constitute approximately 69% of the general fund expenditure budget in the current fiscal year.
The city had practiced accelerated payments to unfunded pension and OPEB liabilities to avoid interest but said that was only a good tactic during strong economic times.
Specifically, within these costs, police and fire department salaries and benefits amount to $78.3 million, representing 65% of these expenditures.
Underscoring the volatility, Flaherty reported that in 2021, unfunded accrued liability sat at $217.8 million, followed by a spike that reached $435.6 million in 2022, representing a 100% increase.
“With the current hiatus of these additional payments, revisiting this strategy makes sense given the financial uncertainty the City faces based on the annual deficits projected in the most recent 10-year General Fund forecast,” the staff report on the recommendation stated.
Michelle Poche Flaherty, the Assistant City Manager, said CalPERS is currently volatile. Flaherty added that the city could save $628,000 by pausing these additional payments.
The only comment came from a written letter saying that while it is important to retain quality employees, public service employees receive “amongst the most generous and expensive benefits.”
“We promised these payments to retirees or those who will be retiring, and we have to honor that as a city,” Council member Alicia Aguirre said.
Council member Diane Howard added that she believes Redwood City is the only city making accelerated payments, and she agrees with the idea of pausing the tactic given the city’s financial uncertainty.
The city put a lot of responsibility on CalPERS’s investments, which had not increased in value as much as they had anticipated.
The audit subcommittee will now work on the following strategy, which will be presented to the city council before crafting the next budget for 2025-26.
